A new way of thinking about store brands

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A new way of thinking about store brands

By Todd Maute - 03/23/2020

Many Google News alerts are lighting up as never before, with such retailers as Macy’s, Walmart, Target, ShopRite, Dick’s Sporting Goods and Amazon all making store brand-related headlines in recent weeks.

But if store brands are growing by leaps and bounds across all channels of trade, the question is why?

Over the past few years, the term “experiential” has been one of the biggest buzzwords in retail. The notion was that exciting, novel and social experi- ences were retailers’ best defense against direct-to-consumer competition.

There’s truth to this. But how many chains can spend enough money to make their stores truly Instagram-friendly? Likewise, it’s great to stroll into Nordstrom and lock eyes with a smiling salesperson who knows your name. However, providing Nordstrom-quality service across a retail organization is especially expensive now that wages are rising.

Here’s the key insight: Quite rightly, retailers increasingly see store brands as a strategic way to attract attention, differentiate themselves and minimize the need to make large capital expenditures.

The likes of Kroger, Costco and Walmart are relentlessly driving private label penetration with savvy approaches to branding, marketing and product development. They understand that this translates directly into customer loyalty — which is critical now that shopping patterns are so mutable.

Just look at pets: First, people bought pet food and supplies at the corner grocery, then they shifted to category killers like PetSmart and Petco, and now they’re setting up auto-orders at Chewy and Amazon. It’s a dynamic that retailers can combat by ramping up their focus on store brands.

The likes of Kroger, Costco and Walmart are relentlessly driving private label penetration with savvy approaches to branding, marketing and product development.

Offering higher-quality, unique, differentiated and compellingly branded private label products gives you a reason to focus on the retailer, not the channel. It’s why Best Buy is winning loyalty with its Dynex, In- signia, Rocketfish and Geek Squad brands.

That’s a little easier now that younger shoppers are agnostic about both national brands and channels of trade, and it means that retailers have every reason to invest more in the development, marketing and branding of private label lines.

And when you think about it, retailers may have a leg up on the national brands when it comes to such strategies.

For starters, top CPG companies with a global reach can find it challenging to launch new products and brands quickly given the need to integrate them into their massive and com- plex manufacturing, supply chain and distribution systems.

Besides their faster speed to market, retailers control merchandising in their stores. That means they can collaborate with manufacturing, branding and design partners to put their expertly branded and packaged products front-and-center at shelf.

In a bid to compete, the nationals are now keen on incubators and venture funds like Blu1877 (Barilla) and Evolv Ventures (Kraft Heinz), which promise to speed up product development in ways that are consonant with the process for store brands.

So count on the battle to intensify, especially since Amazon and Alibaba are still in the beginnings of their strategies.

Moving forward, we could see new iterations like Chewy or Amazon stores located close to the consumer and filled with private label brands. More traditional retailers should also double down on their owned brands. As they do so, they will need to stay connected to their original vision. Elasticity has limits: Stretch a brand too far and it will break.

For those of us involved in producing, designing, branding and marketing store brands, it’s nice to see that they’re no longer just a “nice to have” — they’re rapidly becoming a strategic necessity.

 

Todd Maute is a partner at brand strategy and design agency CBX, New York.

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